Probability of default low in Ukraine - Fitch
2013-10-09 11:32:16
Probability of default is low in the short-term perspective in Ukraine.
Director of the analytical group for sovereign ratings of European countries with emerging economies, leading analyst of Fitch Ratings on Ukraine Charles Seville has said about this in comments to Ukrinform Tuesday.
"Ukraine has financed the bulk of repayments on public debt and the NBU debt for 2013, therefore the probability of default in the short term is low," he said.
As Seville noted, in the absence of access to the Eurobond market or the financing from the IMF, it will be difficult for Ukraine to refinance the upcoming repayment of external debt of the state and the NBU in the amount of USD 8.7 billion in 2014 without reducing the reserves to very low levels. Accordingly, in such a situation the risks may increase regarding Ukraine's ability to service debt.
According to the international expert, the free trade area with the European Union may have a positive influence on the Ukrainian economy due to attraction of direct foreign investments.
"In the medium-term perspective, the free trade area can contribute to the modernization of the Ukrainian economy and attraction of greater foreign investment from the EU," he is convinced.
According to Seville, today the Ukrainian economy is "unsustainable" due to reduction of currency reserves and difficulties with attraction of external borrowings.
"The Ukrainian economy is unsustainable. In 2013, the economy will not grow, despite a good harvest in the agricultural sector. In addition, there are risks of the national currency depreciation. There is also a fear that foreign debt servicing will be more difficult, as foreign exchange reserves continue to decline, and it will be more difficult for the country to attract foreign borrowing to refinance maturing obligations," he said.
At the same time, the expert noted that according to the Fitch agency outlook, real GDP growth in Ukraine in 2013 will be about 0.5%. According to him, there is risk that this index will be lower. The Fitch will revise Ukraine's rating this November.